Re-forming the reforms

It’s the opening day of the first regular sessions of the new Congress, the 18th one that will officially convene starting today. By tradition, the Senate and the House of Representatives will conduct their ceremonial joint opening sessions. And at every opening of the regular sessions of Congress, the President – former Davao City Mayor Rodrigo Duterte – will deliver a state of the nation address (SONA).

Up to the last moments before the formal opening of sessions today, rumors still flew thick that some congressmen are reportedly bent to stop the “15-21 term-sharing” arrangements between presumptive Speakers, Taguig City Rep. Alan Peter Cayetano and Marinduque Rep. Lord Allan Velasco.  

Fueling the rumors are the two sets of breakfast invitations to Congressmen, one sent out by freshman Davao City Congressman Paolo “Pulong” Duterte and the other by Cayetano. Pulong has supposedly “invited” Congressmen from the newly formed Duterte coalition to a breakfast meeting with him before the start of sessions of today.

 According to Cayetano, Pulong reportedly accepted his offer to be the House deputy speaker for political affairs. Pulong will be one of the 12 deputy speakers who would serve as the “alter ego” of the Speaker in their respective areas of assignment.

It will be the fourth SONA of President Duterte since he took office at Malacañang Palace in 2016. His third SONA got stalled last year after the surprise House coup that unceremoniously removed Davao del Norte Rep. Panteleon Alvarez as Speaker. Understandably, the former Davao City Mayor does not want a repeat of this scenario that might take away again his SONA moments.

At the Senate, on the other hand, there had been an orderly transition of the “term-sharing” arrangements during the 17th Congress between former Senate president Aquilino “Koko” Pimentel III who served the first two years and the remaining one year was taken over by former Senate majority leader Vicente Sotto III who remains Senate chief up to present.

 As a continuing body, Sotto thus continues to be the Senate president. But as agreed beforehand by the new “super majority” in the Upper Chamber, Sotto will be formally elected today as Senate president of the 18th Congress.

 Over the weekend, Sotto announced that comebacking Senator Pia Cayetano has accepted to head the Senate committee on ways and means to complete the various Senate committees chairmanships. Senators with moist eyes towards the next presidential elections in May 2022 have obviously avoided like a plague to chair the Senate ways and means committee.

This is because the ways and means committee handles all tax and tariff matters which are definitely very unpopular issues, especially to voters.

A lawyer by profession and a former corporate lawyer, Cayetano – elder sister of the presumptive Speaker – can capably head the Senate ways and means committee. She is a cum laude graduate at the University of the Philippines where she finished her economics degree as well as her subsequent law degree. Like her brother, she belongs to the Nacionalista Party that coalesced with President Duterte’s PDP–Laban in the last elections where she won under the administration-backed 12-man senatorial ticket.

The incoming chair of the Senate ways and means committee will shepherd the remaining administration tax reform bills that the 17th Congress failed to approve into law. On top of the wish list of the Duterte economic agenda is the approval of the second package of the Comprehensive Tax Reform Program. Originally called Tax Reform for Attracting Better and Higher Quality Opportunities or TRABAHO bill, it seeks to reduce the corporate income tax rate from 30% to 20%.

It also rationalizes existing tax and other fiscal incentives that were given to all businesses and industries in the country, both foreign and local owned. It was approved by the Lower House during the 17th Congress but got stuck at the Senate. The TRABAHO bill suffered from the backlash of approval into law by the 17th Congress of the Tax Reform Acceleration and Inclusion or TRAIN Law for short. While the TRAIN Law reduced the personal income taxes, it also imposed excise tax on petroleum and other products and services. Thus, it was, however, largely blamed for the uptick of inflation rate in the country following its effectivity in January last year.

A principal author of TRAIN Law, Albay Congressman Joey Salceda, however, argued it was the unmitigated price increase in the global crude oil market that caused economic pressure to non-oil producing countries like the Philippines that pushed inflation to high levels last year. During our Kapihan sa Manila Bay breakfast news forum last week, Salceda disclosed, one of the first House measures he filed is a new TRABAHO bill.

“First in the plate would be TRABAHO bill, or now being called Corporate Income Tax Rationalization Act, or CITRA for short,” Salceda cited. Under the CITRA bill, Salceda explained, “overstaying incentives which have become dysfunctional already” would be gradually phased out until year 2029.

He strongly dismissed claims and fears that this would drive away foreign investors when the government reforms will make the existing tax and other fiscal incentives to be “more performance-based, more time-bound, more targeted and more stable.” On the contrary, Salceda explained, it would give these existing investors more money to invest in other productive enterprises and earn more profit.

Salceda showed to us the economic model submitted by the Department of Finance, CITRA bill would create 140,000 new jobs a year, mostly in agriculture in terms of backward linkages like production of raw materials. Since all tax measures must emanate from the Lower House, Salceda vowed to help steer its speedy approval at the House ways and means committee as incoming vice chairman.

After re-forming the reform measure on corporate taxation, Salceda believes, it would finally hurdle approval into law before the end of this year.